Crude oil prices extended their gains from Thursday earlier today and looked set to interrupt a three-week losing streak, if the gains hold.
They might well reverse, however, as Gulf of Mexico oil producers begin to restart operations following Hurricane Francine. The hurricane had prompted the shut-in of as much as 42% of Gulf production, equal to about 730,000 barrels daily, supporting prices.
However, more than this was affected in terms of total production, according to UBS analysts, who put the total amount affected at 1.5 million barrels daily. This would reduce monthly output in the region by 50,000 bpd, the analysts estimated.
It is worth noting, however, that prices demonstrated somewhat surprising resilience to the latest monthly report of the International Energy Agency, which revised down its oil demand growth outlook by 70,000 bpd to 900,000 bpd. The IEA cited weaker China demand as reason for the revision.
Normally, IEA demand growth outlook revisions prompt immediate reaction on the oil market but this month, the disruption to U.S. production caused by Francine seems to have offset the effect. Alternatively, traders had already factored in the revision, after OPEC also revised its demand growth outlook down earlier this week.
"A previous dip to an almost three-year low called for some near-term breather to end the week, as market participants price (in) for the disruptions to short-term oil supplies caused by Hurricane Francine," IG market strategist Yeap Jun Rong told Reutters.
"The overriding themes for the remainder of the year are weakening Chinese demand, and OPEC+'s subsequent strategy around potentially defending market share in this tepid demand environment," Commonwealth Bank of Australia analyst Vivek Dhar told Bloomberg.
Oil gained some additional support this week by expectations that the U.S. Federal Reserve would decide to start cutting interest rates at its next meeting, scheduled to take place on September 17 and 18.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More